CommonWealth REIT surges as 2 holders press change

In this Sept. 12, 2012, photo, Andrew Neitlich poses in front of one his investment homes in Venice, Fla. Neitlich once worked as a financial analyst picking stocks for a mutual fund. During the dot-com crash 12 years ago, Neitlich didn't sell his stocks, but like many others he is selling now. An analysis by The Associated Press finds that individual investors have pulled at least $380 billion from U.S. stock funds since they started selling in April 2007. (AP Photo/Chris O'Meara)

In this Sept. 12, 2012, photo, Andrew Neitlich poses in front of one his investment homes in Venice, Fla. Neitlich once worked as a financial analyst picking stocks for a mutual fund. During the dot-com crash 12 years ago, Neitlich didn't sell his stocks, but like many others he is selling now. An analysis by The Associated Press finds that individual investors have pulled at least $380 billion from U.S. stock funds since they started selling in April 2007. (AP Photo/Chris O'Meara)

FILE - In this Aug. 3, 2011 file picture workers clean the company's logo at a building of E.On in Datteln, western Germany. Earnings for German utility E.ON rose sharply in the first half of 2012, boosted by a 23 percent increase in sales despite Germany's move away from nuclear power, the company reported Monday, Aug. 13, 2012, as it reiterated its full-year outlook. First half net income attributable to shareholders rose to euro2.9 billion during the period, up from euro691 million last year. (AP Photo/dapd/ Volker Hartmann. File)

FILE - In this Wednesday, March 7, 2012 photo, Apple CEO Tim Cook announces the new iPad in San Francisco. Apple CEO Tim Cook is calling a shareholder lawsuit against the company a "silly sideshow,"on Tuesday, Feb. 12, 2013, even as he said he is open to looking at the shareholder's proposals for sharing more cash with investors. (AP Photo/Paul Sakuma, File)

People pass the AIG building, in New York, Tuesday, Jan. 8, 2013. American International Group Inc. said Tuesday its board of directors will weigh whether to take part in a shareholder lawsuit against the U.S. over the government's $182 billion bailout of the insurer. (AP Photo/Richard Drew)

FILE - In this Monday, July 16, 2012 file photo, Dawn, a Procter & Gamble product, is displayed at Target in Durham, N.C. Procter & Gamble’s cost-cutting plan helped its fiscal first-quarter results beat Wall Street expectations on Thursday, Oct. 25, 2012. That comes as a much-needed boost for CEO Bob McDonald, who has been criticized for not doing enough to turn around the world’s largest consumer products company. (AP Photo/Gerry Broome)

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NEW YORK (AP) — Shares of CommonWealth REIT soared to their highest point in more than a year Tuesday after two of its shareholders said the stock is undervalued and that they're willing to buy the rest of the company.

THE SPARK: Corvex Management LP and Related Fund Management LLC said that they feel CommonWealth REIT's portfolio of real estate assets is undervalued. Corvex and Related own about 9.8 percent of CommonWealth's stock, combined.

Corvex and Related said in a letter sent to CommonWealth's board that the company needs to immediately stop its stock offering and debt repurchase.

On Monday CommonWealth announced that it started a tender offer to buy up to $450 million of some senior notes due in 2014, 2015 and 2016. It also announced a public offering of up to approximately 31.1 million shares, with the proceeds being used to buy back the notes.

Corvex and Related said that if they don't receive a response, they would look to have CommonWealth's board removed and would want to replace them with five independent trustees.

The companies also said that they would be ready to buy all of CommonWealth's outstanding stock at a "significant premium" to its current market value.

THE ANALYSIS: Michael Bilerman of Citi Investment Research said in a client note that the stock offering would reduce leverage and be a positive from a balance sheet perspective. Still, the analyst said he's disappointed in CommonWealth's asset sales execution.

Stifel Nicolaus' John Guinee said that the stock offering and debt repurchase strategy would be very dilutive to CommonWealth's funds from operations.

Funds from operations, or FFO, adds such items as amortization and depreciation to net income, and it is considered a key measure of the strength of a real estate investment trust. Amortization and depreciation are accounting tools used to measure the value of a long-term asset over time.

Both Bilerman and Guinee maintained "Sell" ratings.

SHARE ACTION: CommonWealth REIT's stock rose $5.37, or 33.9 percent, to $21.22 in afternoon trading. The shares touched $22.30 earlier in the session, their highest level since August 2011.